Nebraska Groups Press Pruitt

With Ethanol Issues at Forefront of Farm Concerns, Administrator Touts WOTUS

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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EPA Administrator Scott Pruitt told Nebraska farmers on Thursday he is working on approving year-round E15 sales. (DTN file photo)

LINCOLN, Neb. (DTN) -- EPA Administrator Scott Pruitt told Nebraska farm leaders his agency is moving toward allowing year-round E15 sales and has no choice but to grant small refinery waivers to the Renewable Fuel Standard.

Before answering tough questions about the RFS during his meeting with the leaders Thursday in Lincoln, Pruitt announced the agency is sending the new waters of the United States (WOTUS) rule to the Office of Management and Budget on Friday. The administrator gave a few hints about what the proposed rule would include. For example, Pruitt said groundwater and prairie potholes will not be considered as jurisdictional with the new rule.

Pruitt met with a coalition of Nebraska farm groups called Common Sense Nebraska as part of a trip this week through the Midwest that included stops in Kansas and South Dakota.

Pruitt may have wanted to focus on waters of the U.S., but Pruitt spent most of the Nebraska meeting answering questions about the Renewable Fuels Standard, E15 and small refinery waivers. The themes were similar with the events in South Dakota and Kansas.

With the agriculture economy on the ropes as a result of low commodity prices and trade battles, farm groups pressed Pruitt to provide a timeline on when the agency will approve year-round sales of E15, gasoline blended up to 15% ethanol.

"We stand ready to proceed," Pruitt said. "I can't give you a timeframe but we're doing the work. I was encouraged to bring the parties together and I brought the parties together, and I said can you help us find an answer. There is a way forward here. I feel confident the statute provides for it (E15). We're in a pause period, but there is a desire to do it."

Ideally, Pruitt said he'd like to see E15 on a fast track of about four months to approval, but that is likely optimistic. Because rulemaking takes time, he said, year-round E15 may not happen in 2018.

"The issue is, when will it penetrate the marketplace?" Pruitt said. "It may take three years."

Ethanol producers and farmers have been concerned about an increasing number of RFS small refiner waivers granted by EPA. In 2016 and 2017, the agency granted more than 40 such waivers. By one estimate, about 1.6 billion gallons of ethanol blending was lost. As a result, ethanol interest groups have sued the agency about the waiver process.

A LOT OF MISINFORMATION

"About the small refinery waivers, there is a lot of misinformation in the marketplace," Pruitt said. "No. 1, it is statutory. Only certain companies can apply for that."

The RFS statute allows for waivers to refiners who produce 75,000 barrels of oil or less per day. Ethanol interests have suggested the agency has pushed the envelope on the statute.

Recent media reports suggest the EPA has been granting waivers to some of the largest oil refining companies in the country.

"That is simply not the case," Pruitt said. He said waivers are determined facility by facility and analyzed jointly with the Department of Energy. It is not being done to affect the renewable volume obligations (RVOs).

Pruitt said as the price of renewable identification numbers, or RINs, go up, the number of applications the agency receives increases. As the agency has stepped up the number of waivers granted, the price of RINs has plummeted.

The administrator said the agency needs to find a way to align the waiver deadlines with deadlines for RFS volumes, in order to make sure the EPA can reallocate gallons lost to waivers.

Currently, the volume obligations are due for finalizing in November and applications for waivers are due the following March. This means waivers are being granted after volumes are set, rather than before.

Biofuels groups have suggested the EPA could go back retroactively and re-assign gallons lost to waivers to other refiners. Pruitt said EPA attorneys have indicated it couldn't be done legally.

MARKET-DRIVEN

"We're always logging a year behind the wheel," Pruitt said. "What fixes it is we need to restructure our timing to recapture in RVOs. We don't control the number of applications (for waivers) that come in. It truly is market-driven. The issue is not Mideast peace, but it comes close."

Pruitt pointed to a court case lost by EPA. The agency previously was granting waivers to small refiners only if they faced bankruptcy. A recent court ruling requires the agency to consider so-called economic hardship.

"I can't sit behind a desk and hand out waivers," Pruitt said. "The ultimate solution would be to provide RIN stability. There is not an ideal solution."

So far, Pruitt's EPA has set the RFS volumes on time after the agency missed final deadlines in multiple years in the previous administration.

Pruitt said proposed 2019 volumes will be released next week, noting there will be increases in all biofuels volumes except for corn-based ethanol. That number will come in at the 15-billion-gallon cap.

Following the meeting, Nebraska Republican Gov. Pete Ricketts said he was encouraged by what he thought was a "full-throated endorsement" of E15 from Pruitt who made his second stop in Nebraska in 16 months.

"We'd like to see E15 move forward," Ricketts said. "We need to work with Administrator Pruitt. He wants to see a stable RIN market and we think E15 would help do that. We'd certainly like to have E15 for next summer. We would like to hear he is moving right away on E15. E15 will be incredibly important to our farmers. Working with this EPA is a night-and-day difference."

FEW CONCERNS

The only concerns raised to Pruitt by the ag groups centered on the small refinery waivers and E15. They were particularly pleased with the move to kill the 2015 WOTUS, rule and embark on the rewrite.

"Our goal with the 2015 rule was that it was not going to be a Lazarus and come back from the dead," Pruitt said.

The agency finalized a rule that extended the effective deadline for WOTUS to take effect by two years. That extension is being challenged in court. Pruitt said he expects the new proposed rule to have at least a 90-day public comment period.

"The 2015 rule was not about water quality," he said, "it was about power. The power over land decisions. That is why it is important to fix."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley